Creating a Place for the Future: Strategies for Entrepreneurship-Led Development in Pakistan

For six decades, Pakistan has faced, and overcome, conflict and calamity. Despite many obstacles, the country’s economy has grown steadily. At critical junctures, successive governments have adopted strategies suited to the circumstances of the day, and the nation has developed steadily due to these particular well-conceived initiatives. Yet, as a consequence of the reactive nature of policy formulation and implementation, the institutions of government are conditioned to think in terms of projects rather than strategies to support growth.

Today Pakistan confronts a new round of immediate challenges and urgent demands. Yet, it is precisely at this moment of apparent crisis—in the aftermath of the devastating flood of 2010 and with security concerns continuing to dominate the national agenda—that the need to change the discourse about the country’s development has become most apparent. Reactive tactics and dependence on external aid have not helped Pakistan to develop or to realize its potential. Sustained and sustainable development cannot come from a collection of projects, no matter how well intended. A new development approach is needed: Building markets. Building opportunity. Building cities. Building good governance. Including youth.

To realize Pakistan’s 21st-century potential, the nation’s political and business leaders must not only meet the demands of the present, but also—and perhaps more importantly—create a space for the future.

For the government, creating a space for the future means removing obstacles to innovation and entrepreneurship—that is, long-term investments that have tpo-tential to provide needed services to a youthful and growing population. It means supporting entrepreneurs as they seek to build innovative high-growth companies—even when those new businesses challenge the dominance of existing firms. It means radically remaking the nation’s cities so they are focal points for creativity, not flashpoints for conflict. It means creating mechanisms to support and empower public servants who push back against powerful interests and overcome institutional inertia.

For business, creating a space for the future means seeking advantage not in regulatory protections that stifle social development but in market innovations that accelerate it. It means developing new products for the global marketplace, in which branded Pakistani producers are underrepresented, and for the domestic marketplace, which underserves Pakistani consumers. It means looking beyond short-term interest and local advantage, and instead building foundations for organizations with the potential to compete over the long term anywhere in the world.

Conditions that allow markets to function normally—that is, economic agents being enabled to operate, compete, and interact with each other on a level playing field¹—create the environment essential for private initiative to thrive and business enterprises to realize optimum productive efficiency. This contributes substantively to economic growth and development. A functioning market without government intervention (albeit with competent regulation as needed) and protected from anticompetitive practices is fundamental to achieving productive efficiency, innovation, and entrepreneurship.

Cognizant of today’s demands as well as those of the future, this paper argues that developing a culture of productive entrepreneurship in Pakistan requires immediate action by the government of Pakistan:

• • Enhance Competition—Despite serious but sporadic initiatives aimed at market liberalization, Pakistan’s economy remains dominated by the government. It is important that all government ministries carefully examine the rationale behind and consequences of direct involvement in the economy, and act assertively to eliminate programs and policies that crowd out private business initiatives. The government should (a) map out, with respect to goods and services, the economic subsidies and protections that are currently operative; and (b) implement a plan to gradually eliminate laws and policies that have the unintended consequence of promoting unproductive entrepreneurship. While the pushback from incumbent firms against a comprehensive competition strategy is likely to be intensive, the alternative to the implementation of such a plan is economic stagnation—an outcome ultimately detrimental and unacceptable to all.

• • Encourage Entrepreneurship—Pakistan has many entrepreneurs. However, the state of competition in many Pakistani industries is such that too many entrepreneurs direct their energies toward rent-seeking rather than productive entrepreneurship. A key...